JJC and a Half-Full Copper Glass

Demand for industrial metals has been so crazy during the past couple
of years that homebuilders were being robbed of their newly installed
copper pipes.

With that in mind, glass-half-full traders may think the current
housing market swoon will have a salutary effect on the crime rate. But
for the glass-half-empty crowd, the record drop in existing home sales
reported Wednesday fuels further fear about a deepening slump.

No matter how you view the glass, there's no doubt yesterday's National
Association of Realtors [NAR] report impacted the demand outlook for
copper and building materials.

Sales of existing homes fell 8 percent in September, the largest
decline since 1999 and nearly double the 4.5 percent drop economists
had expected. The median home price also declined, according to NAR.

Traders on the COMEX Division of New York Mercantile Exchange must have
viewed the report through half-empty glasses. By day's end, December
copper futures had fallen 6.1 cents, or 1.7 percent, to settle at
$3.4525 a pound. Wednesday's low of $3.43 represents a 50% retracement
from the $3.78 life-of-contract high reached on October 2.

More tug-and-pull should be expected between the half-empties and the
half-fulls. Technically, you could view the current pullback as a
bearish minor cycle within a larger bull market. Several
indicators—stochastics, MACD and momentum, specifically—seem to point
that way.

The half-fulls can now take aim at the market with a new tool.
Barclays' iPath DJ-AIG Copper Total Return Sub-Index (NYSEARCA:JJC)
exchange-traded note [ETN] was launched last week, together with a raft
of other commodity subindex ETNs. JJC offers, for 75 basis points, and
fifty bucks a note, pure COMEX copper exposure without the need to
establish and maintain a futures account.

This makes a long-term allocation to copper practical, as well as
enhancing the ability of slicers-and-dicers to better shade their
commodity bets with copper over- or underweights.

Of course, the half-empties can use the ETNs as well. They'd just short
JJC notes. In any event, the new ETN will likely lend a patina to
copper allocations not seen before.